It has been suggested that 2024 is the year of nature’s inclusion into the climate agenda, in particular in the carbon market. At the same time, there are increasing concerns about the impact of carbon market projects on the environment, especially when it comes to tree plantations. The establishment of monocultures might be a cheap way to generate a quick capture of carbon, but can have detrimental effects on local ecosystems.

So we were wondering: how many carbon credits are generated by projects using methodologies that require biodiversity consideration, and how many are generated by projects using methodologies that do not? We read the many different methodologies used in forestry and land use projects, and found a complex picture. The ‘biodiversity attention’ score that we developed for this investigation, which assesses methodologies and scrutinises individual project design documents, will soon be uploaded to the AlliedOffsets database, so that anyone can compare individual projects according to their biodiversity attention.

Classifying methodologies

All of our studied forestry and land use projects were divided into two categories: 

• Restoration: active or passive restoration of ecosystems, like tree planting 
• Conservation: the protection of existing ecosystems to avoid emissions through for example deforestation

This segmentation is crucial, since the two types have different biodiversity dynamics. Conservation projects aim to preserve the status quo of ecosystems, which can be important in habitats that are quickly being altered for more intensive human use. Their biodiversity impact is linked to the environmental management structure that is put in place locally, and can be compared to biodiversity loss in surrounding areas. This article will only look at restoration projects, whereas our ‘biodiversity attention’ score will also include the attention given in conservation projects. 

The biodiversity impact of restoration projects is more tangible, since they entail the direct alteration of ecosystems with the aim of increasing carbon sequestration. This includes tree planting, but also other ecosystem management techniques. Researchers have warned of the potential adverse biodiversity effects of inconsiderate tree planting, including the planting of non-native species and the encroachment of open ecosystems like savannas. 

To study the tools used in these restoration projects, we reviewed their methodologies, which are registry-approved documents outlining the forestry and land use intervention. We classified them into ‘high’ and ‘low’ biodiversity requirement groups, depending on whether they explicitly require the restoration of native ecosystems. Examples include the requirement to use seeds of native plants, or financial incentives to restore ecosystems with a native plant species composition. 

Overview of project types and issuances

As of April 2024, AlliedOffsets has information on 6,660 forestry and land use projects, which are registered on 13 carbon registries and form a representative overview of this sector. Most of these projects we classify as restoration projects (88.7%), highlighting the importance of this project type. These projects include afforestation, reforestation, and mangrove projects. 

The number of projects does not tell us everything, though. Many restoration projects are small scale, or have not issued carbon credits yet. For example, one of the largest batches (forest restoration under the French Label Bas Carbone, or LBC, scheme) includes 700 projects, but most of them are very small, and LBC has not issued any credits yet. 

Therefore, we looked at the number of carbon credits that have been issued for different project methodologies. From the point of view of issuances, conservation projects are more prominent. Restoration projects only represent 38% of the total number of carbon credits issued in forestry and land use projects (~380 million credits out of a total of 1 billion). This reflects the disproportionate number of credits issued by large-scale conservation projects, particularly REDD+.

Analyzing Restoration Methodologies: Impact on Issuances and Biodiversity Compliance

Focusing on restoration, our assessment of 64 methodologies shows that roughly half of them (31) have biodiversity requirements. Looking at the projects attached to them, a vast majority (85%) of restoration projects operate under methodologies that have biodiversity requirements. From the perspective of issuances, we can also see that the majority of restoration credits are issued for projects with methodologies that have biodiversity requirements (67%). The difference between these numbers can be explained by a great number of restoration projects operating under methodologies with biodiversity requirements that issue only a small number of credits or have not issued any credits (yet).

Looking at the breakdown of issuances it becomes clear that the bulk of restoration issuances are dominated by only a handful of methodologies. Most striking, the credits developed with California Air Resources Board (ARB) methodologies represent over half of all the restoration credits that have been issued. The high supply of these credits can be explained through their link to the California state compliance market. 

The two methodologies that are used often in these restoration projects (reforestation and improved forest management in U.S. Forest Projects) have clear biodiversity requirements in their “Natural Forest Management Criteria”. For example, the projects must work with over 95% native species, which are specifically identified. There are special exceptions, such as the planting of non-native species to anticipate climate change range shifts when approved by peer-reviewed papers, which attests to a high level of scientific input in these projects. 

The projects that are developed according to a ‘low biodiversity requirement’ methodology often follow UN Clean Development Mechanism methodologies (AR-ACM0003 and its predecessor AR-ACM0001), which were developed in the early 2010s and are regarded as quite outdated. Most of these projects are registered with Verra. Verra announced in 2022 that they were replacing these methodologies, but their replacement methodology (VM0047) also does not include any biodiversity requirements. To underline this, a search of any terms relating to biodiversity only yields the one-time mention of the word ‘biodiversity’, but this is in the title of a paper quoted far down the reference list.

Insights into Credit Pricing and Environmental Impact

A question that follows from the investigation is whether the biodiversity requirements are reflected in the price of credits. Using estimated prices from the AlliedOffsets platform for 2018 vintage credits for selected methodologies, it can be observed that the average prices between ‘high’ and ‘low’ biodiversity requirement restoration projects do not differ significantly. Still, there is a greater potential for premium prices in the ‘high’ requirement projects. This can be explained by the fact that many projects that have high biodiversity requirements are located in the Global North and operate at smaller scales, which are more expensive to run. At the same time, they do issue significant numbers of credits, like the Woodland Carbon Code projects in the United Kingdom (which typically sell at over $30/ton).

Credit buyers now often don’t have information about the biodiversity dimensions of the products they buy, so it will be interesting to see whether the provision of this information could motivate project developers and registries to work more on making their projects biodiversity-positive. In addition, upcoming regulation could require carbon credit buyers to purchase from projects with specific biodiversity requirements. 

An example is the upcoming EU-wide certification scheme for carbon removals, which will include sustainability criteria - more specifically for positive biodiversity impacts. Furthermore, market initiatives like the Integrity Council for the Voluntary Carbon Market (ICVCM) are also developing biodiversity criteria as part of their sustainable development safeguards. It remains unclear what the scope of this type of regulation and standards will be, but it could pose a serious threat to the sale of older credits and credits that are currently being developed with methodologies like VM0047. That is, unless they can demonstrate positive impacts on biodiversity outside of their methodology.  

Conclusion

This investigation shows a highly diversified field of forestry and land use methodologies, of which some have the most detailed biodiversity requirements and others do not even mention it. Overall, the analysis shows the higher biodiversity requirements of ‘premium’ methodologies that are small-scale and tailored (like PlanVivo or LBC) or tied to compliance markets in the Global North (like the California ARB case). In general, it is good news that two thirds of the restoration issuances have been created in projects that follow biodiversity-positive methodologies.

A drawback of only looking at project methodologies is that they do not necessarily reflect the reality of projects on the ground. They have been drafted beforehand, distant from the field, where local conditions (both natural and social) vary spatially and temporally. Therefore, this analysis is more one of developer intent than of practical application. In general, there is an urgent need for detailed information on biodiversity developments across the full range of projects to draw general conclusions about the impact of the voluntary carbon market on nature. We are working hard to generate more insights, so stay tuned!